How HAMP modifications are escalated

By Felix Salmon
December 21, 2010
post this morning about the way disputes are resolved in HAMP, I went back and forth with Treasury a few times. And it turns out that there's much more to it than the Homeownership Preservation Foundation -- although finding out exactly how it all works is basically impossible unless you know someone at Treasury. Transparent this is not.

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After publishing my post this morning about the way disputes are resolved in HAMP, I went back and forth with Treasury a few times. And it turns out that there’s much more to it than the Homeownership Preservation Foundation — although finding out exactly how it all works is basically impossible unless you know someone at Treasury. Transparent this is not.

As far as I can make out, HPF runs something called the HOPE Hotline. The hotline then passes callers through to counselors who are not HPF employees, but rather employees of counseling organizations, all operating under the rubric of MHA Help. The counselors often work together with the homeowner when dealing with the servicer.

If MHA Help gets nowhere with the servicer, the case can be escalated one more level to something called the HAMP Solution Center, or HSC. You don’t need to be MHA Help to escalate to HSC: government offices can do it too and sometimes other third parties acting on behalf of the homeowner.

Here’s where things start getting a bit surreal, though. According to a 24-page MHA Supplemental Directive from November, an Escalated Case is just given back to the servicer to be decided all over again — essentially, it’s escalated all the way back to the very entity which was being complained about in the first place. The servicer is required, under MHA rules, to have lots of ducks in a row when it makes the decision on the escalated case and it needs to make its decision within 25 days. But it’s still up to the servicer to make the decision. And once the servicer has made that decision, the escalated case is considered resolved.

Which helps to put this chart in context:


The chart comes from this document and shows the amount of time that servicers actually take to resolve an escalated case. None of the privately-owned servicers (GMAC is state-owned) seem to be able to hit the 25-day requirement, with BofA being particularly bad. And the crazy thing is that these are all cases that the servicers have already made a decision on.  If they were remotely competent, they should just be able to revisit their existing paperwork and check to see that the decision made sense.

Effective February 1, it’s going to get a bit tougher for servicers: they’re going to have to provide the escalations staff with information relevant to the case at hand, like the numbers they’re using for debt and income and the correspondence they’ve received from the the borrower. Expect the numbers in the chart to start rising at that point.

But for the time being, the only check on the servicers is coming from Treasury’s compliance agents — who happen to be a group within Freddie Mac called “Making Home Affordable-Compliance” or MHA-C. The next compliance report is being released on Wednesday; the last one is here. (See slide 11.) MHA-C doesn’t look at every escalated case; instead it looks at a sample of 100 cases and does a “second look review”. Sometimes it agrees with the servicer’s decision, sometimes it disagrees and sometimes it can’t make up its mind:


Wells Fargo stands out here as being particularly bad, although the bank conspicuous by its absence is Bank of America. We’ll see how they do when the new report comes out; they got a pass on this one because they were too busy engaging in “other compliance activities” to do the second look reviews there.

As far as I can make out, the only time that an impartial third party will ever arbitrate a loan-mod decision is if you’re lucky enough to be picked as one of the sample of 100 in the MHA-C review. In that case, if MHA-C disagrees with the servicer, the servicer basically has to go back and do it again, until MHA-C is satisfied; in the meantime, it can’t foreclose on the property.

But the overwhelming majority of homeowners looking for a loan modification will never come anywhere near an MHA-C review. Indeed, more than 29,000 homeowners have been stuck in their “trial” modification programs for over a year, even though the trials aren’t supposed to last for more than three months.

The whole thing is a mess, and it’s incredibly opaque: there’s no website explaining how it all works in plain English, with the aim of guiding people through the escalation process. But with Treasury seemingly happy to let the servicers make all the decisions, and even staff the board of the main helpline, it’s hardly a surprise that the HAMP process has been so very frustrating for so many people.


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I went to read the site after the first post and clicked on the help button for counseling and saw it was redirected. Most of the “help” seems to be redirected to help lines, which also are not HPF as you noted. it is convoluted and pretty ridiculous.

When Government hands over money to an organization (non profit or not) there should be inspections and paperwork to make sure it’s working. To say it looks loopy and like someone’s hand ins in the pie is an understatement. Methinks it is a way to ensure a nice smooth process sans lawyers… and definitely not in the favour of the homeowner.

But I bet there are lots of people patting each other on the back.

Posted by hsvkitty | Report as abusive

The bit that fascinates me is that only 5% of samples failed in the MHA-C review. This is remarkably low and at odds with the sense from this blog and other comments on the HAMP system. Is the sample checking lax or is the system actually working well?

Posted by RogerS | Report as abusive

This program lacks so much reason, logic and humanity that after attempting to work through it I’m so delirious I will do everything in my power to help hold big banks accountable for mortgage fraud. It boils down to a decision made by the servicer who has no incentive to provide permanent modifications after successful trial modifications. Why did the government hand over TARP money without any strict guidelines?

Please tell your Attorney General to hold the big banks accountable for mortgage fraud –

“Please forward this message onto others urging them to sign on.
They can view the letter, and add their names, at”

http://helpmakinghomeaffordable.blogspot .com/

Posted by PLEASE_HELP_MHA | Report as abusive

Our government could put an end to all of this by simply doing a forensic audit of each loan, and if there is a fraudulent document, forgive the loan immediately. Think how much money that would put back into circulation.

Posted by 14401 | Report as abusive

We know someone who received three sub prime loans on the same house and never received a signed document of any kind, each time. The last document was a Modification, and it was a grand total of four pages. No truth in lending, or settlement statement. When banks start foreclosure they should provide a copy of the signed and recorded documents along with the notice of foreclosure.

Posted by 14401 | Report as abusive

14401, I don’t know how that is possible. When you go to the closing, the bank’s lawyer hands you two copies of a stack of forms. You are required to initial every page of the one stack (and sign several of the more significant agreements). The other stack is handed to you to take home.

If anybody isn’t give that second stack, they should request a copy before they start signing. That’s what copiers are for.

Not sure whether a loan modification requires a settlement statement. It is (by definition) a modification of an existing agreement, not a stand-alone transaction. Four pages might suffice.

Posted by TFF | Report as abusive